Sri Lanka offers four blocks in Mannar basin for oil, gas exploration licencing
EconomyNext: Sri Lanka has offered four offshore blocks in the Northwestern Mannar Basin for international investors to explore oil and gas in a fresh attempt to attract investments into the sector after an earlier attempt ended in a failure due to not commercially viable production.The Mannar Basin, which lies between southern India and northwestern Sri Lanka, may hold around $260 billion worth of oil and gas resources, A Sri Lanka’s former energy minister has told the parliament in 2021.The latest attempt is the first under President Anura Kumara Dissanayake government to explore oil and gas in the area. Based on seismic surveys, previous governments have estimated that a 30,000 square kilometre area off the north coast of the country holds over one million barrels of oil resources.“We are opening four significant exploration blocks in the Mannar Basin and invite experienced international energy companies to evaluate this opportunity and work with Sri Lanka as long-term partners in the responsible development of our natural resources,” the island nation’s Energy Minister Anura Karunathilaka said.Sri Lanka held its first international licensing round for petroleum exploration in 2007, with one exploration block awarded to an Indian firm that pulled out amid concerns over the commercial viability of oil production despite the discovery of gas and hydrocarbons in the Mannar basin.“Now we have different scientific data, and we believe that the time has come to move forward with great determination and clear sense of purpose…..We are sure that history will not repeat it again,” Karunathilaka said.Out of the four blocks, second is the smallest with 5,689.05 square kilometres area and the fourth is the largest with 11,728.3 square kilometres area.In 2007, the island nation was assigned to China and India on nomination basis. However, this time, it has not been assigned for any other countries, the officials said.“Nobody is barred from bidding,” Neil De Silva, the Director General at the Petroleum Development Authority of Sri Lanka (PDASL) told EconomyNext.Sri Lanka’s pursuit of offshore oil and gas exploration began in the late 1960s, initially focusing on shallow offshore areas in the Gulf of Mannar and the Cauvery Basin.Early exploratory drilling yielded limited technical successes until 2011, when Cairn Lanka, a subsidiary of Cairn India at that time, made a breakthrough by discovering significant natural gas accumulations in two offshore wells within the deepwater Mannar Basin.These discoveries established the presence of commercially viable natural gas and condensate deposits.However, due to complex deepwater extraction dynamics, a lack of domestic natural gas infrastructure, and global energy market shifts, commercial production failed to materialize, leading Cairn to exit the block in 2015.Following years of stagnation, Sri Lanka modernized its regulatory setup by enacting the Petroleum Resources Act of 2021 and establishing the Petroleum Development Authority of Sri Lanka (PDASL) to manage exploration rights and update offshore acreage block maps.To revitalize foreign investment and lower its heavy reliance on coal and oil imports, the country introduced new joint-study regulations and structured new licensing frameworks.These efforts aim to attract international oil and gas majors to explore and commercialize the estimated hydrocarbon potential across its three major prospective sedimentary basins: the Mannar, Cauvery, and Lanka Basins.
OSL take:
Sri Lanka’s decision to offer four offshore exploration blocks in the Northwestern Mannar Basin to international investors signals a renewed effort to unlock the country’s largely untapped energy potential. More importantly, it comes as the island’s recovering economy and rising commercial activity create a broader pipeline of opportunities across the energy sector. The Mannar Basin remains the most significant frontier. Earlier seismic studies have indicated the presence of substantial oil and gas resources, although previous exploration failed to establish commercially viable production. The latest licensing round, therefore, represents an opportunity for experienced international energy companies to reassess the basin using newer technologies, stronger technical capabilities and a more investment-oriented framework. But Sri Lanka’s energy investment story extends well beyond offshore hydrocarbons. Rising electricity demand, industrial expansion, tourism growth and the development of ports, logistics and other infrastructure are increasing the need for reliable and affordable energy. This is creating business/investment opportunities in renewable power, particularly solar, wind and other clean-energy projects, as well as electricity transmission, storage and related infrastructure. For international investors, Sri Lanka’s location adds another dimension. The country’s proximity to major Asian markets and its strategic ports could support investments linked to energy logistics, fuel storage, maritime services and potentially future regional energy trade. The expansion of the energy sector could also generate opportunities for Australian, Indian, Japanese, Chinese, Middle Eastern and other international companies with expertise in power generation, exploration, engineering, technology and energy financing. As Sri Lanka moves from economic stabilisation towards expansion, energy is increasingly becoming a strategic investment sector.
| Article Code : | VBS/AT/20260902Z_2 |